How the Role of Life Insurance Changes over Time
As you move closer to retirement, it’s natural to wonder if your life insurance needs might change. Maybe your children are grown and out of college. Maybe your mortgage is paid off. Perhaps you want to shift policy premiums towards your retirement savings instead — and prepare for immediate needs instead of the “just in case.”
Yet life insurance can do more than protect your family during your working years. In fact, as your needs and priorities evolve over time, the role of life insurance can evolve with you.
Protecting Your Family While You’re Working
This is the most common need for life insurance: Protecting your spouse, children or other dependents if you pass away during your working years. After all, they depend on your steady paycheck and the benefits from your job. And they’re counting on years of earning potential ahead of you, not to mention your important role in the household. Your contributions would be missed financially as well as emotionally.
One thing is certain, those contributions are important throughout your life. Your spouse may still rely on you in retirement just like they do today. But if you purchased term life insurance, your income protection ends when your policy expires — even if your financial needs for insurance continue after this time.
Retiring the Old Way of Thinking
As you evaluate your family’s needs now and into retirement, it may be time to consider the long-term benefits of whole life insurance. Unlike a term policy, which provides coverage for a certain amount of time, whole life is a permanent policy you can always rely on. It provides a death benefit while also offering a cash value account that grows tax-deferred and can be accessed for emergencies or other expenses1, even before you retire.
During retirement, you can withdraw cash from your whole life policy to supplement your retirement income. It could provide a stable source to draw from during market downturns.
While whole life policies deliver the potential to increase the death benefit and cash value over time, they also typically require more expensive premiums. That’s why some families choose a combination of both whole life and term insurance, or gradually convert part of their term policy into whole life over time. It all depends on what you can afford and what your needs are today — and what makes sense for you down the road.
Leaving Something Behind
First and foremost, the whole life policy and death benefit are there to help your surviving family after you pass away. Your spouse or loved ones can use the policy for any number of things, including:
- Covering final expenses – A basic funeral could cost as much as $10,000, which factors in the costs of a burial plot, headstone and casket, as well as the expenses of a standard funeral service. That is a large sum of money that your whole life policy can cover — rather than leaving the expenses for your spouse or children.
- Giving to a charity – Your whole life policy is an ideal way to leave funds to a cause or organization that has impacted your life or helped your family. Also, the death benefit you leave may be significantly higher than the premiums you pay.
- Replacing your income – Retirement income benefits like Social Security, pension plans or certain annuities are often significantly reduced if one spouse passes away, potentially leaving the other spouse in a difficult financial situation. The death benefit from a permanent life insurance policy could help make up for some of this lost income.
Getting More out of Life (Insurance)
In most cases, as you get older, you gain a clearer understanding of what you want out of life. Make sure you get the most out of your life insurance, too. If you’re thinking about canceling or replacing your policy, you may want to think twice. You should also talk to a Financial Professional to discuss your options and determine the right path as you walk down the road of life (insurance).
1Access to cash values through borrowing or partial surrenders will reduce the policy’s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.
Insurance products issued by Massachusetts Mutual Life Insurance Company (MassMutual) (Springfield, MA 01111-0001) and its subsidiaries, C.M. Life Insurance Company and MML Bay State Life Insurance Company (Enfield, CT 06082).